The reintegration of LMNP depreciation into the calculation of capital gains since February 15, 2025, changes the game for any investor who was only considering annual cash flow. Investing in rental real estate in France now requires modeling the exit taxation even before signing a preliminary agreement. Here, we detail the technical trade-offs that truly determine the rental profitability of a project.
LMNP Exit Taxation: Rethinking Profitability Calculation
The status of non-professional furnished rental allowed until recently to depreciate the property for accounting purposes without these depreciations weighing down the capital gains upon resale. The finance law for 2025 has put an end to this advantage: the deducted depreciations are reintegrated into the real estate capital gain for transfers made since February 15, 2025, except for limited exceptions.
In practical terms, an investor who has deducted several tens of thousands of euros in depreciation over ten years will see their taxable base upon resale increase accordingly. The strategy of increasing depreciation to reduce annual tax on BIC income, then reselling after twenty-two years to benefit from capital gains exemption, loses part of its logic.
We recommend systematically simulating two scenarios: furnished rental under the real regime with depreciation, and unfurnished rental under the real regime with deduction of property deficits. For an older property requiring work, the property deficit that can be deducted from global income may prove more advantageous than LMNP depreciation, whose tax effect will be partially reclaimed upon sale.
Specialized platforms for structuring rental operations, such as https://www.investinor.fr/, allow for comparison of these scenarios by integrating exit taxation.
EPC and Rental Ban: Impact on the Rental Yield of an Older Property
The energy performance diagnosis is no longer just a simple indicator. Properties classified as G are banned from rental since January 1, 2025. The extension to properties classified as F is planned for 2028, and to E in 2034.
For an investor targeting older properties with a discount, this constraint transforms the renovation budget into a primary profitability variable. A property classified as F purchased today must be renovated before 2028 to remain usable. The cost of energy renovation (insulation, heating system change, ventilation) must be included in the initial financing plan, not in a subsequent supplementary budget.
Rents and Energy Class: A Growing Gap
Market analyses published in September 2026 show that rents for properties classified A to D are increasing, while those of energy-inefficient properties are stagnating or declining. The rent gap between a renovated property and an energy-hungry property thus adds to the purchase discount to determine the actual net profitability.
An older property classified as F acquired with a significant price discount may seem attractive on paper. However, when factoring in the cost of renovations, the rental vacancy period during the work, and the rent cap related to the energy class, the net yield often falls below that of a property already classified as C or D purchased at market price.
Mortgage Structuring: Neglected Levers
The nominal rate of the mortgage captures all the attention of investors. In practice, three technical parameters weigh more heavily on the profitability of a rental investment financed by credit.
- The loan amortization period determines the monthly cash flow. Extending the duration reduces the monthly payment and improves cash flow, but increases the total cost of credit. In a project where the exit strategy is medium-term resale, a long duration with an option for early repayment without penalty offers the best flexibility.
- The repayment deferral (partial or total) during the renovation phase avoids accumulating loan payments and rental income loss. We observe that few investors negotiate this deferral, even though it significantly improves the IRR in the first two years.
- Borrower insurance through external delegation remains an underutilized cost reduction item. Over the total loan duration, the difference between the bank’s group contract and a delegation can represent several thousand euros, directly impacting the net yield.
Choice of Tax Regime: Micro or Real, Unfurnished or Furnished
The choice between micro-BIC, micro-property, real BIC regime, and real property regime is not limited to a flat-rate deduction versus a charge deduction. Each combination produces a different tax result depending on the property’s profile and the investor’s marginal tax bracket.
Furnished under Real: Still Relevant Despite the Reform
The real BIC regime in LMNP remains of interest to investors planning to hold the property for a very long time. The capital gains exemption after twenty-two years (for income tax) and thirty years (for social contributions) remains in effect. The reintegration of depreciations mainly penalizes short and medium-term resales.
For a property generating high real charges (old co-ownership, delegated management, recurring maintenance work), the real regime allows for the deduction of all these charges and creates a low or even zero tax result for several years.
Unfurnished under Real: The Return of Property Deficit
Unfurnished rental under the real regime becomes competitive when the property requires deductible work. Loan interest, renovation work, co-ownership charges, and insurance premiums can be deducted from rental income. The generated property deficit is deductible from global income, which directly reduces income tax in the year of the work.
This mechanism, combined with the absence of reintegration of depreciations upon resale, makes unfurnished rental under the real regime particularly suitable for older properties to be renovated in high rental tension areas.
The choice between these regimes depends on the intended holding period, the amount of work, and the marginal tax bracket. A relevant tax trade-off is made on a spreadsheet, not on intuition. Modeling the net cash flow after tax over ten, fifteen, and twenty years remains the only reliable way to compare options before committing.
